Standards for State-building World Bank DEC Lecture November 25, 2013 Roger Myerson Paper: http://home.uchicago.edu/~rmyerson/research/std4sb.pdf These notes: http://home.uchicago.edu/~rmyerson/research/std4nts.pdf Related paper: "Rethinking the fundamentals of state-building" PRISM 2(2):91-100 (2011). http://home.uchicago.edu/~rmyerson/research/prism10.pdf 1
A fundamental question of social theory On developmental path from anarchy to prosperity, what comes first? A timeless fundamental question of social science. An immediate practical concern of interveners in a state-building emergency. A charter * for custodians of democratic state-building : • not to endorse "invasions to bring democracy," which always bring much harm and only rarely can bring some good to the general population, • but to set standards for holding interveners accountable after an invasion. Can democratic state-building be distinguished from imperialist domination? Elections are not enough. Development economics is uncomfortably related to state-building. Political leaders build broad support from reputations for providing public goods, so development assistance can be hard to separate from political assistance. When root causes of underdevelopment are political, a program for economic development cannot succeed without inducing some political change. Is democratic state-building even possible? A nondemocratic state can become democratic. Conquerors have established nondemocratic political stability throughout history. Why is democratic state-building harder? (Philippines 1900 vs Afghanistan 2002) * In sense of Paul Collier. 2
Need for general principles of democratic state-building Many argue: "No cookie-cutter one-size-fits-all plan for political development." But local political experts are never neutral . Most prominent indigenous supporters of an intervention may expect central positions of power, and thus may tend to advocate a more centralized state. To avoid such biases, interveners must rely on some general principles underlying politics and government in all societies. Summary of suggested principles: With the broadest possible multinational support , occupying powers should foster political reconstruction based on two pillars: a multiparty national assembly and elected local councils , each funded with a transparent budget , because democratic development depends on an ample supply of leaders with good reputations for using public funds responsibly in local and national politics. 3
Points of perspective from economic theory 1. Schelling's focal-point effect shows how rational behavior can be influenced by cultural perceptions of legitimate authority within recognized boundaries. The need to coordinate makes public perception a compelling social force, and so the status of a recognized leader can become a self-confirming social fact . 2. Agency theory teaches the importance of long-term incentives in organizations. Who guarantees that promised incentive rewards ( moral-hazard rents ) will be paid? Top leaders with an ownership stake in the organization (Alchian Demsetz '72). Agents in nonpolitical organizations may also look to courts of the state, but not in political organizations that exist to take power in the state itself. Political leaders are the ultimate guarantors of incentive systems in their society . Powerful agents must trust them in the allocation of moral-hazard rents. 3. Reputational equilibria of repeated games : individuals can be strongly motivated by long-term benefits of maintaining a good relationship with others. Key to successful leadership: a reputation for reliably rewarding loyal service . Fear of losing it deters a leaders' temptation to deny promised rewards. 4. Profit levels in oligopolistic markets depend on barriers to entry. Effectiveness of democratic competition depends on reducing political entry barriers, enabling new leaders to build reputations for cost-effective public service . 4
Need for standards: interveners can manipulate democratic forms Why are elections not enough to verify that leaders are indigenously selected? Interim control by foreign forces can be used to install an interim leader who can develop the first national patronage network since the collapse of the old regime. Voters can then be asked to ratify a constitution, drafted under this interim leader, with no specified alternative but the implicit threat of chaos. This constitution can be written to concentrate power in an office for which the interim leader will be the strongest candidate, generally the presidency. A national presidential election demands that voters coordinate on a few candidates, and the interim leader naturally can become a focal contender. Against diffuse opposition that lacks access to patronage, and controlling the electoral process, the interim leader can be acclaimed as an elected president. But his position will really be owed to the foreigners who installed him. By the self-perpetuating nature of leadership , foreigners' political intervention can have lasting effects, unless people generally reject the intervention's legitimacy. A society's norms for identifying its authoritative leaders are its core cultural asset. Successful standards for democratic state-building may make it less unacceptable. 5
Elements of democratic state-building To be able to mobilize a network of active supporters, any leader needs a reputation for reliably rewarding good service ( gratitude ). Fear of losing it deters a leaders' temptation to deny promised long-term rewards. My APSR 2008: A strong leader is surrounded by courtiers wary of ingratitude. Leader's primary law ( personal constitution ): do nothing that could lose their trust. Government agencies and security forces and other pillars of the state must develop under political leadership, which sustains their incentive system. A national government depends on broad acceptance of its authority by local leaders throughout the nation. ( legitimacy ) In long run, local leadership also depends on national recognition and support. In democracy, leaders should compete for popular approval by offering better public service for a lower tax price, taking less corrupt profit. But voters may re-elect a corrupt incumbent if they think all others would be worse. Competitive democracy depends on a plentiful supply of leaders who have good reputations for using public funds responsibly. (My QJPS 2006.) Those who compete in any system do not want it more competitive. Established leaders have an interest in higher political entry barriers . Entry barriers are maximal in dictatorships. 6
Goal: create opportunities for new democratic leadership To develop a stronger democratic system, the essential goal must be to develop the supply of democratic leaders who can compete meaningfully in elections. The key political goal is to increase the national supply of leaders who have good reputations for spending public funds responsibly to provide public services (not just to provide patronage benefits to their loyal supporters). Such reputations can only be developed with opportunities to spend public funds. Such opportunities are multiplied when some share of the public budget is devolved to autonomously elected local governments . (My QJPS 2006.) (Parliamentary coalition governments also may distribute budgetary authority to effectively autonomous political leaders.) The distribution of funds among different branches of government needs reliable public accounting under the finance ministry . (Ghani Lockhart 2008) But letting local councils exercise some autonomous authority can reduce entry barriers into national politics, so national leaders may prefer centralization . Centralization also lets president allocate moral-hazard rents of local government. Loyal supporters may hope to be appointed mayor or governor. 7
Vital interactions between local and national politics Effectiveness of local government can suffer when positions of local authority become rewards in the national patronage system that is based in the capital. Local councils can use more local information in supervising police and other local public services. I've argued: local democracy can make national politics more competitive , as successful local leaders can prove qualifications to compete for higher office. Conversely: multiparty national politics can make local politics more competitive , as rival national parties can sponsor competition for unpopular local bosses. Effective democracy depends on interactions between local and national politics . Democratic political reconstruction should be based on two pillars: a multiparty national assembly , and elected local councils . 8
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